A reverse mortgage loan helps a senior person to get access to liquid cash in the form of monthly installments and do not have to repay the amount as long as he/she continues to stay in the property. However, reverse mortgage may not always be the best choice. Here are a few things which you should consider while taking out a reverse mortgage loan.
- There are different types of reverse mortgages in the market - Like any other mortgage loans, different types of reverse mortgages are available in the market. Each loan has its own complexities along with unique terms and conditions. Therefore, it is necessary to employ a lawyer to review the entire documents so that you are well aware of its every terms and conditions and avoid unnecessary hassle in the future.
- Reverse mortgage loan may affect government program eligibility - There are certain government programs, such as, Medicaid, whose eligibility is calculated on the basis of your total liquid asset base. Therefore, if you've taken out a reverse mortgage loan and haven't spent it yet, it may affect your eligibility for Medicaid. So, it is essential you consult a financial advisor to be sure that the reverse mortgage funds won't impact your eligibility for such government programs.
- The property can be sold in absence of one spouse - If only one spouse's name is in the reverse mortgage contract, then the lender can initiate the selling process after the death of the borrower. This is because it is the rule of the reverse mortgage that the entire loan amount needs to be paid after the death of the borrower. So, the other spouse will be homeless if he/she is not able to make the entire payment or his/her assets are not enough to repay the loan amount.
- The reverse mortgage loan can be expensive - The servicing and loan origination fees often go unnoticed while taking out a reverse mortgage loan. So, it is always necessary to review the entire document before signing the reverse mortgage loan contract.
- Lender may foreclose the property if it remains vacant - One of the greatest risks associated with a reverse mortgage loan is that some of the mortgage documents have a clause; it says that the lender can call the loan that is, require full payment if the property remains vacant for a certain period of time. So, if the owner becomes sick and has to spend some months in the hospital or in rehabilitation, the lender can foreclose the property.
It is better to not get enticed by the reverse mortgage advertisements featured on the television. If you need emergency funds, talk to a financial advisor to be sure that you are making the right decision; and if required, take the help of a lawyer while taking out a reverse mortgage loan, so that you can remain stress free and do not have to worry about the future.